Posted by: thefinancedude | March 13, 2008

Oil and McMansions…leverage for disaster

What is the American dream?  Is it defined somewhere so that all of us are on the same page?  People risk their lives to enter into this country just so they have an opportunity at the American dream.  From society we learn this ideal is buying your own home.  Not just any home mind you, but new McMansions.  McMansions aren’t new; they just weren’t called that in the past.  They were once referred to as mansions, but the mansions got even larger so a new name was needed.  These McMansion have big garages so two cars are needed at least.  When the vehicle gets bought it needs to be as big and impressive as possible to display that this person achieved the American dream.   

One of the vehicles in that garage is most likely an SUV.  Now most don’t need an SUV, but they need to show you that they’ve made it in life. Now mind you, it’s only one person in the vehicle, but they need the extra room.  People need that extra room since most live a significant distance from their place of business.  When they sit in traffic people want to feel like they’ve accomplished the dream.  Even though they are wasting a lot of gas it doesn’t matter because they claim they can afford it.  Is this the American dream?

Think about your long days spent in these cars.  We buy houses in suburbs because housing is more affordable and generally considered superior at educating our children.  We get up early in the morning to go to work to be able to afford all these things.  To get to work we sit in traffic for 45 minutes.  To get home there’s an additional hour needed to move from work to home.  Are we all happy doing this?  I would argue that no one likes to sit in traffic, but what’s the alternative?  There in lies the problem facing America.   

As the price of gas rises, these commutes become more expensive.  At some point each household will need to analyze how beneficial living in the suburbs really is.  Europeans electrified their rails and created mass transit following the gas crisis of the 1970’s.  America chose a different path.  We chose to build farther away pushing metropolitan cities ever larger.  Mass transit was shunned in favor of independent driving, one of the core American values.  That blind faith in this independence is threatening to undermine the ability of every American to earn a living. 

Our auto dependence is eating through oil at nearly 21 million barrels per day.  Every year we find ways to drive even more, and this is in spite of rising prices.  Prices communicate scarcity.  The higher the price, the more scarce the resource.  This is simple economics and easy to understand.  This would explain why platinum is worth more than gold; it’s simply scarcer.  Prices are going to rise every single year until we’ve exhausted the world’s finite supply of oil.  This is what happens in a free market.  Everyone is not supposed to be able to have a car.  That will include the middle class in my lifetime, as cars will not be economical due to the high cost of gas and the distances traveled to maintain our careers. 

The American dream is dying.  McMansions are gluttonous as well as the SUV’s that sit inside the garages.  How will the middle class pay for the home or the bills when they can’t get to work?  Mass transit is desperately needed to provide a means of transportation as the oil age draws to a close.

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